Next Year

Most people who try to read books on economics come away with a single thought: these economists must be really, really smart ‘cuz I can’t understand a word they say.

The world has thousands of economists. All study the past, but the ultimate object of economics is to predict the future. If we know what the economy is about to do, we also know how to invest and therefore make a fortune.

But there’s a problem. No matter how incomprehensibly bright economists may be, they’re not very good at their fundamental job: predicting the future.

For example, in the past decade,

1) Only a handful of economist predicted the financial crash of A.D. 2007-08.

2) Since A.D. 2008, most economists have predicted a sharp “V”-shaped sustained economic recovery that has, so far, failed to appear. Conversely, the vast majority of economists failed to predict the economic stagnation that’s persisted since A.D. 2008.

There’s a fundamental reason why the “dismal science” provides unreliable predictions: it’s been highly politicized. As every politician knows, “It’s the economy, stupid.” The public is so fixated on the “economy,” that any politician who wants reelection knows that he must maintain a strong economy—or, if need be, the illusion of a strong economy.

The problem of politicization can be seen in two phenomena—consumer confidence and the correlative governmental lies:

1) The economy is so dependent on consumer “confidence” that the “science” of economics has become subjective. Any serious mention of objective truth that might panic the “masses” and collapse the economy is avoided. Government officials and economists are therefore inclined to lie in order to support an unrealistically optimistic view of the “economy”.

2) Economic data is now “officially” falsified to support government’s assurances that all is well. Even economic predictions based on honest data are unreliable, but predictions based on officially falsified data can’t possibly provide accurate predictions.

As a result, the “science of economics” and “political science” have become inextricably confused.

I don’t mind the confusion and attendant impediments because:

1) I’m not an economist;

2) I’d rather we faced the truth now, even if it precipitated an economic depression; and

3) When the “science” of economics inevitably falters due to institutionalized lies and “politically correct” premises, it will open the door to predictions based on common sense.

This is not to suggest that my predictions are any more accurate than those of recognized “economists”. But if my predictions aren’t any better, they’re surely not much worse. More, insofar as I try to rely on common sense (which, as you know, ain’t so “common”), my premises aren’t obscured by mathematics or convoluted language, my conclusions are fairly obvious (some might say “simplistic”), and my arguments are easily understood (or, if necessary, easily rejected) by most readers.

So, as I gaze into my crystal bowling ball, what major premises do I see that will be most determinative for our economic future?

1) The truth will out.

Sooner or later—maybe before an economic collapse is obvious, maybe after the collapse is so far gone as to be deniable—the government’s unrealistic optimism will be recognized by most Americans as “official lies” and rejected. Market manipulation will cease. The “free” market will reassert itself. We may even see politicians forced to tell the truth.

Our economy is based on so many lies that when we hit our “moment of truth,” all hell will break loose. The public (which formerly delighted in government’s “sweet, sweet lies”) will be outraged when they’re forced to face the unpleasant truth: there’s no free lunch. I.e., folks will howl when they find themselves liable to pay for all the “free” benefits previously provided by government for the past 40 years.

Those who’ve depended on government welfare and subsidies will demand that someone be held accountable for all the (failed) lies. Scapegoats will be found. Heads will roll. Some politicians and even rich people may be jailed. The potential for political revolution will be great.

2) The debt is too great to be repaid.

The official national debt is $16 trillion—about $50,000 for every man, woman and child. Technically, that debt might be paid in full, but only after Americans were subjected to at least five years of austerity and Greece-like riots.

However, John Williams (Shadowstats.com) calculates that an honest measure of the national debt may be $85 trillion—about $275,000 for every man, woman and child. That debt can’t ever be paid in full, or even by half. Common sense sez there’s no way to squeeze $275,000 out of each American (over $1 million from the average family of four) simply because the people don’t have sufficient assets to pay such bills. If I had to bet, I’d predict that at least 80% (and perhaps 90%) of that debt can’t be paid and therefore won’t be paid. If so, at least 80% of the current value of existing treasury bonds will be repudiated. Those holding US bonds will lose their assets.

The Congressional Budget Office (CBO) has calculated that the entire funded and unfunded national debt is about $202 trillion—about $650,000 for every man, woman and child. If it’s impossible to pay the national debt as calculated by John Williams, it’s doubly impossible to repay the national debt calculated by the CBO—and doubly certain that those holding paper debt-instruments are going to lose their assets.

For big government to survive and continue to borrow, the existing national debt must be largely repudiated. I see only three ways to repudiate the national debt:

1) Admit national bankruptcy (which is true), openly repudiate much of the existing debt and rebuild the economy from scratch.

2) Kill the creditors.

3) Cause significant inflation—which will allow the existing debt to be repaid with cheaper dollars and thereby “secretly” diminish the value of the existing debt. (I.e., we’ll repay $16 trillion, but that $16 trillion may only have $8 trillion in purchasing power.)

Declaring national bankruptcy and killing the creditors would destroy the economy—at least temporarily. Destroying the economy is both pointless and dangerous. The fundamental idea of “economics” is to control the people. If an economy collapses or is intentionally destroyed, economic controls disappear. In the resulting chaos, even the rich and powerful (who seek to rule by means of economic controls) become vulnerable to violent retribution. The Powers That Be may want an economic decline, but they shouldn’t want an economic collapse.

The only remaining strategy that might get us out from under the massive, unpayable debt and still allow the economy to survive, is inflation—government’s most benign and “secret” strategy for reducing the unpayable debt. Therefore, I expect to see significant inflation—probably well over 10% a year—starting as early as A.D. 2013.

4) One man’s debt is another man’s asset.

If I borrow $100,000, I’m burdened by a debt for that amount. But someone else will be holding a paper debt-instrument bearing my signature that they regard as a $100,000 asset. My debt will be his paper asset. But if I can’t pay my debt, his paper asset is wiped out.

We live in an economy where most debts (see Major Premise #2, supra) can’t and therefore won’t be paid. The conclusion is inescapable: most paper “assets” will be rendered largely worthless by inflation or outright repudiation. Those holding their wealth in the form of paper debt instruments will lose their assets.

• Gazing further into my crystal bowling ball, I also see some Minor Premises:

A) A.D. 2012 is a presidential election year.

A.D. 2012 has been one of the worst years for gold since A.D. 2000. Since November 2nd, A.D. 2011 until today, the price of gold has fallen from $1731 to today’s $1684—a 3% loss that’s far below the 18% average annual increase of the past twelve years.

The last time we saw a similarly poor performance for gold was A.D. 2008 when price of gold fell from $806 on November 2nd, A.D. 2007 to $733 on November 2nd, A.D. 2008—a 9% loss.

But A.D. 2008 and A.D. 2012 have a common denominator: both were presidential election years. It may strain my claim to common sense, but I doubt that these declines in the price of gold were coincidental. Instead, I suspect that presidential election-year declines are politically motivated and intentional.

Insofar as it’s true that “it’s the economy, stupid,” incumbent politicians don’t want to seek reelection in a bad economy. The vast majority of Americans are bewildered by the “science” of economics and know nothing of M3, U6 or the velocity of money. However, the people absolutely understand if the prices of food and fuel are rising. Rising food and fuel prices make folks angry. Angry folks don’t vote for incumbents. Therefore incumbents have a vested interest in pacifying the voters with low food and fuel costs—especially in presidential election years.

Crude oil is a major component of fertilizer and the fuel costs associated with growing and transporting food. Thus, when the price of crude rises, so do the prices of food and fuel.

The link between the prices of gold and crude oil isn’t absolute, but there’s a strong correlation.

When gold goes up, so does crude oil. Usually.

When gold goes down, so does crude. Usually.

Therefore, I suspect that incumbent politicians have a vested interest in suppressing the price of gold in order to hold down the prices of crude, food and fuel in election years.

Admittedly, the prices of gold, crude, food and fuel are not suppressed in off-year elections. But, under my Major Premise #3 (above), the government’s primary objective is to inflate the currency to escape the debt. Out of every four years, they may allow deflation (falling prices of gold, crude, food and fuel) during one presidential election year—but the other three years should be marked by inflation, inflation, inflation.

If this minor premise is correct, we can expect to see the price of gold rise through A.D. 2013, 2014 and 2015. Likewise, during the next presidential election year (A.D. 2016) we can expect another severe “correction” in the price of gold.

B) The election follies of A.D. 2012 will end tomorrow.

Minor Premise # A (the price of gold is artificially reduced in recent presidential election years) is supported by the fact that after falling 9% in the twelve months prior to the 2008 election, gold shot up $148 to $881 by the December 31st, 2008. That was a 20% rise in the price of gold in just two months after the A.D. 2008 presidential election.

If Minor Premise #A is valid, we can expect the rate of inflation and the price of gold to also increase dramatically after tomorrow’s presidential election.

Although a 20% rise (to $2,000/ounce) in the next two months is not unprecedented or impossible, I’m not predicting that gold will jump another 20% by the end of this year. But if my Minor Premise #A is valid, I expect the price of gold to rise at least 10% to $1850 by year’s end.

(If the price of gold doesn’t rise over the balance of this year, my claim to common sense will be discredited. On the other hand, if the price does rise as I predict, it’ll be proof that I may have enough horse sense to write for the Farmer’s Almanac.)

C) The “fiscal cliff” cometh in January of A.D. 2013.

The “fiscal cliff” refers to a series of laws that mandate tax increases and federal government spending cuts that should go into effect in the first week of January, A.D. 2013.

The “fiscal cliff” laws are intended to reduce government’s deficit spending, but are also projected to cause a recession in the first half of A.D. 2013.

The big question is whether Congress will allow some or all of the “fiscal cliff” laws to go into effect this coming January or if they’ll vote to suspend those laws.

Given that: 1) A.D. 2013 is not an election year, politicians can act without fear of voter anger; and 2) some attempt (no matter how futile) must be made to deal with the debt and annual deficit, I predict that all or most of the fiscal cliff laws will be allowed to go into effect in January.

If so, the recession that some still deny will become undeniable in first quarter of next year.

D) The current economic depression is global.

We are heading into a global depression similar to that seen in the 1930s. No nation is immune. No nation sufficiently strong or prosperous to prevent or evade a coming global depression. No nation is strong enough to save the global economy or other nationals economies. The duration of the current global depression remains to be seen, but this depression is taking place. More, in the same sense that Obama blamed Bush for the recession he inherited, our next president will openly admit the global depression and use it as an excuse for the economic problems coming to the US.

E) The price of gold may be inhibited, but not truly suppressed. (see Major Premise #3—Government Wants Inflation.) Some people argue that the prices of gold and silver have been artificially suppressed. I believe their arguments. But it’s important to note that the price of gold has increased by an average off 18% per year since A.D. 2000.

Q: How do we square the argument that the price of gold has been suppressed with the fact that the price has increased by an average of 18% per year for over a decade?

A: See Major Premise #3—Government Wants Inflation.

Because government wants inflation, it must therefore allow the price of gold to rise. There can’t be any convincing inflation of the dollar unless the price of gold is also rising.

However, government does not want uncontrolled inflation and therefore will probably not allow gold to spike more than 20% per year. Thus, the price of gold is both rising and suppressed in that it’s not rising as dramatically as it might in a truly “free” (unmanipulated) market.

Predictions:

A.D. 2012 is nearly over. Not much left to happen except tomorrow’s presidential election that’ll give a whole new meaning to “the lesser of two evils” and a couple of possible wars in the Middle East. All in all (except for a rising price of gold), the next two months should be dull.

But next year, A.D. 2013—in the sense of the ancient Chinese curse “may you live in interesting times”—promises to be a lot more “interesting”.

President Obama has been recorded promising the President of Russia that once he’s reelected, he’ll be free to do a lot of things that he was prohibited from doing in his first term. Apparently, Obama has some surprises up his sleeve. So, if Obama is reelected, we might expect more Executive Orders, more wars from the President who won the Nobel Peace Prize for being black, possible gun control efforts, higher taxes, income redistribution from the productive (but not the rich, of course) to the non-productive, and even more globalism. I’m sure I’ll enjoy four more years of Obama even more than I enjoyed the first four.

On the other hand, if Romney is elected, we might expect him to fight valiantly to keep the world safe for the plutocrats and neo-fascists. I fully expect to enjoy four years of Romney just as much as I enjoyed the last four years of G.W. Bush.

But, no matter who’s elected tomorrow, we’re headed into an obvious recession and probable depression in A.D. 2013. Unemployment will rise and the economy will slow. But, based on Major Premise #3—Government Wants Inflation to reduce the national debt—prices will rise.

We are about to enter the worst of all possible economic circumstances: stagflation—a slowing economy marked by rising prices. So long as inflation can be precipitated, the price of gold will rise.

If there’s a bright side in the next few years, it’ll be the rising price of gold in A.D. 2013, 2014, and 2015.

22 responses to “Next Year”

It truly is sad that your seriously common sense approach is so UNCOMMON, and that “We the People” have allowed the “congresscritters” to establish their kingdom & fifedoms, and are simply interested in our creature comforts, to such a tremendous degree that we won’t lift a finger to stop this insanity, lest we “rock the boat” and jeprodise our precious little land of milk, honey & comfort…or…more to the point…boose, sex, sports and abundant food! We truly CAN be said now to have become: “The land of the fat, and home of the indulent”

If we followed the existing government of The united States, that is… “The Law of The Land”, our Constitutional government and our economy would be more predictable. If we removed any and all people that did not follow our Constitution, we would have the government The Founders gave us, low taxes,[See Article one Sections 2 & 9], no or small debt, prosperity and Liberty and Freedom.

“Statutes (ordinances, court rules, etc.) that deprive a Citizen of the rights of Person or Property without a regular trial,according to the course and usage of the Common Law, IS NOT The Law of
The Land. Hoke v. Henderson, 15 N.C. 15, 25 AM Dec. 677.

The economy is a 100% government owned entity. There is no such thing as a private economy. Instead it is created by and for the benefit of government servant/masters. CAFR is a large part of the overall plan.

In the U.S. typically one receives benefits from four layers of government. They are municipal (or township), county, state and federal. There is a cost per person to each layer that is quite easy to determine. You just take the budget divided by the number of people served. If you do this for all four layers you might come up with a cost per person of $16,000 or $64,000 for a family of four. On an average basis most families do not come anywhere close to having this income. If they were to pay for all the services government provides they have nothing left for food, clothing, housing, etc. In other words all money is created to purchase government benefits.

Reality is painfull!! We can’t seem to understand this and keep “hoping for better”. We are not willing to pay the price and follow “the rules’. THE RULES DON’T CHANGE!!!! They never will!!!
Bruce parker M.D.

What “RULES” are you referring to,Good Doctor ? The following are some court rules & they change annually,to some degree.

A petition authorized by 28 U. S. C. §1651(a), §2241, or §2254(a) shall be prepared in all respects as required by Rules 33 and 34 as prescribed by Rule 14, Rule 39,and Rule 12.2. The petition shall be served as required by Rule 29 (subject to subparagraph 4(b) of this Rule, 3. (a). (b).

Are you by chance a Neurosurgeon? I’m serious. I think you know I could use some help in that department. What “rules” are you specifically referring to? What do you specialize in as a M.D.?
Thanks.

If you can’t get something for nothing in physics, then fiat currency (with which you can purchase a tangible “something” with mere paper or electronic digits) can’t be “physical”. Thus, FRNs would seem to violate the laws of physics which I presume to be part of “the laws of nature and nature’s God.” If so, FRNs violate “the laws of nature’s God.”

Maybe. But that would depend on which “Good ‘LORD'” and which “Good Book” you’re talking about.

But if I recall correctly, there are two verses in the Bible that report God saying, “The gold and silver are mine.” (So far as I know, He is silent on who owns the FRNs.)

I actually suspect that the fact that the gold and silver are God’s may explain mankind’s global fascination and attraction to those metals. I also suspect that if the gold and silver are God’s, then a money made of gold or silver cannot be owned by any private entity like the Federal Reserve or even a government. If my suspicions were roughly correct, it might be possible to argue your right to own gold and silver under the 1st Amendment as an act of religious freedom.

Don

November 9, 2012 at 2:27 AM

If you have enough fiat currency, you can exchange that fiat currency for a Fiat & probably get a few clad coins back..

@ “…..FRNs violate “the laws of nature’s God.”

The “God” of this present evil world agrees,but this part of his mission. I’ve had many so called “CHRISTIANS” to tell me if I did not like my FRNS, they would be more than happy to take them off my hands. They,like many other things the “God” of this present evil world promotes too. And they are in “church” every SUNDAY morning Rappin with the Rev about the Sunday afternoon football game coming up, after they are through “praising” & “worsipping” WHO?

I was being fuh-C-shus,as to the above statement.There is not anything written in the Holy Scriptures, a.k.a. “The Good Book,” about frns.

Here is something I would like to know & understand. In the Man or other animals case,the case, where “you” & the “State Attorney General” were involved, why did you rely on the so called 1st Amendment, of the U.S. Constitution, when, I’m sure there is a like worded Bill of Rights provision in, The Constitution of the State of Texas.?

I’m sure if I use the same term, i.e., the Bible,some people would say that depends on which Bible you’re talking about. The “Good Book” was written thousand of years before the first FRN was ever printed. I guess some people’s sense of humor is sometimes just not there. Also it seems it is ok for some people to use the term “Good “LORD” & it is commonly understood WHO it is in reference to,who it means,but then again, it depends on WHO is using it. Also, I’ve noticed that it depends on the question as to whether it will be answered. Sometimes it is not convenient to answer some questions, but I understand what pick & choose means.

Thank you Harry. The first time I saw “lol” on this Adask law website I thought it meant lots of love but that was just my thought.I didn’t know what it meant. But lots of love did not “fit” in with some of the comments so I asked those who used it if they would explain what it meant & the answers I got were: Don,You’ve got to be kidding, Don, are you serious? Everybody knows what lol means.Don, get real,etc. Most of the “answers” I get when I ask a question are belittleing etc Tell you something I do know that nobody on this “Adask law” site “seems” to. They do not seem to know what Government Issued ID is. I guess they don’t connect the “Issue” part, a.k.a. Government Inventory,a.k.a. Government Issue. If I make a mistake,which I often do, the mistakes I make are brought to my attention.. fast. Like a duck coming down on a June Bug. Remember the song, “You’re so vain?” You’re so vain you probably think this song is about you? Now, Harry, this is not meant that I am implying “you,” Harry,are vain. It’s just that I have “seen” some very vain people on this website. Thank you, Harry, for not telling me that everybody knows what The law/rules of thermodynamics #1 IDK means Don, are you serious,you’ve got to be kidding. Harry, if you were vain, that’s how you would have “answered.” Thanks for not insulting me.